Implications of Solar Energy Boom on Transmission Grids: The Cases of Germany and California

November 25, 2015 | 00:00

Implications of Solar Energy Boom on Transmission Grids: The Cases of Germany and California

In recent years, solar-powered electricity in Germany and the U.S. state of California has surged to the point of providing an affordable source of electricity to thousands of households. They could sell excess energy to the grid, which has put an unprecedented pressure on the power grid. These two major industrial economies with sizeable populations and a growing share of solar energy face similar challenges and opportunities presented by the...

In recent years, solar-powered electricity in Germany and the U.S. state of California has surged to the point of providing an affordable source of electricity to thousands of households. They could sell excess energy to the grid, which has put an unprecedented pressure on the power grid. These two major industrial economies with sizeable populations and a growing share of solar energy face similar challenges and opportunities presented by the distributed [1] solar energy. This article examines the effects of booming distributed solar energy in California and Germany on their respective transmission grids and compares how both economies have been handling the pressure on the transmission system from renewable energy.

From Leap of Faith to Game Changer

California has experienced a rise in the share of solar generated electricity as shown in Figure 1. Most of the growth comes from utility-scale solar energy, [2] which reached over 5 percent this spring. However, distributed solar energy in California is increasingly taking a share.

Propelled by the California Solar Initiative (CSI) in 2006, which sought to support close to 2,000 megawatts of residential and commercial solar projects by 2016, solar energy exceeded CSI’s goal by hundreds of megawatts. CSI plans to reach 33 percent of renewable sources of electricity by 2020 and 50 percent by 2030. Similarly, Germany’s move towards renewable energy since 1991, when it began subsidizing renewable energy production, has begun to yield noticeable results. Germany now receives 31 percent of its electricity from renewables; energy generated from solar Photovoltaics (PV) constitutes close to 7 percent of its total electricity generation (See Figure 2).

Impact of Solar Energy on the Grid

In both Germany and California, the rise of distributed solar brought both technical and economic challenges to the power transmission grid that has historically been relying on distribution of electricity produced by fossil fuel-based centralized power plants. Critics of integration of renewable energy in both markets point out the same issues: more power intermittency due to supply fluctuations of renewables that puts pressure on the grid system and results in blackouts, oversupply of electricity during hours when it is not consumed, and higher electricity rates for residential consumers. Solar power advocates admit that the boost of electricity supply from wind and solar PV is partly responsible for the flagging economic performance of Germany’s fossil fuel-based power generation. Meanwhile, California’s utilities point out that rather than reducing the use of grid, solar energy producers use it more intensively by selling surplus energy to the grid and avoid covering the costs of maintaining the grid. They also argue that since solar producers are usually a wealthier segment of the population, the latter pass on the costs of maintaining the grid to those who do not use solar.

Even though there are shared concerns between Germany and California, the system reliability of both markets has not been dramatically affected or deteriorated with the integration of renewables into the electricity system. To a degree, Germany is ahead of California in integrating solar, and its growing electricity production from renewables has been mostly positive. Despite the influx of renewables and intermittency they bring to the electricity system, Germany’s power grid is ranked as one of the most reliable in the world (See Figure 3) and the grid continues to provide consistent capacity. Germany’s average annual power outages time per customer came under 12 minutes for the first time in 2014, [3] which is the lowest in Europe. In contrast, the U.S. loses power for 2 hours or more on any given day. [4]

Rolling With the Punches

Both California and Germany began making their conventional grid networks more flexible to smooth power fluctuations and oversupply and to maintain system reliability. For example, Germany’s minute-by-minute, hour-by-hour, and intra-day electricity market is now more adapted to responding to imbalances within shorter timeframes. Day-ahead weather forecasting has also evolved in Germany to balance the flow of energy from renewables. There is improved technical capability to manage two-way power flows of solar-generated electricity via special tap-changing transformers, [5] although more technical advances would be needed to make local distribution grids more responsive and flexible to renewable energy.

Similarly, California is taking steps to improve flexibility of its power system via shorter scheduling times to add resources to the grid and incorporating renewables from neighboring states to keep the system reliable. California Independent System Operator’s 2014 agreement with other energy balancing authorities in western U.S. to create the Energy Imbalance Market (EIM) added more flexibility into its system and facilitated the integration of renewable generation. EIM is an automated mechanism that balances power demand and supply every five minutes by selecting the cheapest resource for the grid. EIM has so far touted cost savings and an optimal use of energy resources, including renewables. [6] To deal with the two-way electricity flow, California began adopting smart meters and smart switches at key sites to redirect power in case of a local outage. Both Germany and California are seeking more technological breakthroughs to reduce grid bottlenecks, more effective monitoring of electricity flows throughout the power system, and incorporation of smart grids. Further integration of renewables will require investments in new or upgrading existing power lines and both markets face a set of similar financing issues with potentially different outcomes.

Challenges Remain

Coping with aging transmission systems and the need for more power lines as more renewable energy is added to the grid remains a challenge to both Germany and California. Germany’s expected retirement of nuclear power plants by 2022, most of which are in the southwest, will make parts of the country more dependent on renewable energy. Additional power lines would be needed to connect the north with the southwest. However, grid expansion has been a hard sell in southern Germany because of “Not in My Backyard” (NIMBY) obstacles. The compromise reached so far is to modernize the existing pylons and underground cables, the costs of which would be lower than building new power lines and would be passed on to consumers. However, delays in building new transmission lines will continue to put pressure on the existing grid. As Germany seeks a long-term solution to expanding new power lines, the cost of energy transformation – Energiewende – in Germany is likely to be borne heavily by consumers through anticipated higher tariffs. However, despite vexing over high electricity rates, Germans continue to support transition to green energy. To a large degree, Germany feels that it has no choice.

California faces a similar challenge of building new power lines to handle its goal of 33 percent of renewable energy by 2020 and a potential NIMBY problem of resisting the expansion of transmission lines. It is estimated that the 33-percent goal will require the Golden State to invest about $12 billion for new transmission. Despite the efforts to modernize the power grid, the U.S. grid network, including that of California, is aging and is stretched to the limit. Utilities in California are investor-owned and it would be profitable for them to build new transmission lines, but state regulators allow them to pass on the costs to consumers and provide utilities with a return on their investment. Given that California’s residential power rates are already the highest in the U.S., it is unclear if the state’s electricity consumers have the appetite for higher rates to support new power lines.

However, the imminent challenge for California in reaching its 33 percent renewable target is an expected overhaul of its existing ratemaking structure, which may derail its booming distributed solar energy production. California’s distributed solar succeeded thanks to net metering tariffs and the federal Investment Tax Credit (ITC). [7] Net metering allows renewable energy-generators to get a financial credit for electricity produced by their onsite system and for feeding it back to the utility. If a new proposal by California’s major utilities to change the net metering system to give less credit for green electricity fed back to the grid by solar generators and an imposition of monthly charges on them is approved, solar advocates argue that these measures will kill the budding renewable energy in the state. Utilities in California want to increase rates on solar producers so that all customers using the grid pay equally for its maintenance and reliability.

Ultimately, the path forward to integrating distributed solar energy in Germany and California is likely to rely on their consumers’ willingness to share the costs of upgrading, maintaining and building new transmission lines. Germany is adapting the whole grid system to incorporate distributed solar through its federal effort. The U.S. currently does not have the equivalent of Energiewende at the federal level. Therefore, California’s utilities have more room to push back. At this juncture, utilities there appear to be less willing to accommodate distributed solar and it unclear whether California’s electricity consumers are ready to bear additional costs of the transition to renewables.
Footnotes1. According to U.S. Department of Energy’s definition: “Distributed energy consists of a range of smaller-scale and modular devices designed to provide electricity in locations close to consumers.”2. Utility-scale solar energy plants produce significant amounts of electricity, which are transmitted from one location to many users via electricity grid.3. “VDE|FNN-Störungsstatistik 2014: Durchschnittliche Dauer von Stromausfällen pro Kunde und Jahr erstmals unter 12 Minuten,” VDE, 2015.4. Massoud Amin, “Eleven Years After the U.S.-Canadian Blackout, What Has (and Hasn’t) Changed,” National Geographic, August 15, 2014.5. “How Is Germany Integrating and Balancing Renewable Energy Today?” Energy Transition, February 19, 2015.6. Herman K. Trabish, “How the West’s New Energy Imbalance Market is Building a Smarter Energy System,” Utility Dive, February 19, 2015.7. ITC provides a 30-percent federal tax credit for solar systems on residential and commercial properties and is due to expire at the end of 2016.